The Dividend Cafe - Daily Covid and Markets - Monday August 3

Episode Date: August 3, 2020

COVID Health Information • There is discussion of testing coming down in the last few days and it will be useful for validation of case reductions and so forth if the testing does not slow down �� for the case declines to be accompanied to steady or growing testing, not reduced testing. The best way to measure that is in the positivity rate, of course. • Much of the testing reduction, though, appears to be related to the hurricane near Florida. I elaborate on Florida data below in the F.A.C.T. section. • The data point that is most disconnected from testing, the result lag problem, and even mortality reporting is Hospitalizations. Nothing drives policy decisions more than hospitalizations. If by the end of this week we continue to see hospitalizations and ICU’s declining, regardless of testing and cases, I believe we will see some of the more onerous restrictions start to be lifted as August kicks into full gear. • The International Journal of Infectious Diseases has published a study evaluating data in Japan to evaluate the effectiveness of school closures in limiting transmission of coronavirus. The report is a tough but brilliant read, and ultimately concludes that school closure was not an effective policy act in constraining transmission. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Hello and welcome to today's COVID and Markets podcast brought to you by the Dividend Cafe of the Bonson Group. I hope you have all had a wonderful weekend or now into the new week and the new month. And Monday, August 3rd is behind us. The market was up close to 250 points today. The two major well-known tech companies of the Dow were driving a lot of that move higher. A familiar theme with other tech moves driving S&P and NASDAQ higher.

But today, the standouts in the Dow kind of had their day in the sun. And the overall market action was pretty constructive in a broad sense as well. The basic framework right now is that there has been very limited breadth in the most recent run-up, primarily in a couple of these big tech companies. Today we got a little bit more breadth, but overall I think the framework has continued to be a real breakdown between the rest of the market, the average stock in the market, and these three or four or five major tech companies. So continuing to watch that. But in the meantime, today, a positive day. We'll break into the COVID health side of things

and then kind of go around the horn real quick and wrap it up. Unfortunately, I'm going quickly just because I have a dinner appointment to get to, but I do want to get you the data that you are listening for. There has been some discussion, and for a good reason, about some testing levels coming down in the last few days. I think part of it, I mean, certainly you can see, like as I'm going to mention in a moment, Florida's testing was way down, as obviously the hurricane issues, weather-related issues.

You've got to believe there's some people not going out and getting tested when they're potentially having to evacuate their homes or whatnot around the hurricane preparation. So with that said, we came in at 732,000 today. It's been up there. It just hasn't stayed in that 850,000 to 900,000 range that we were at. It just hasn't stayed in that 850,000 to 900,000 range that we were at. I don't think that you want to see the test levels come down, that the cases are declining, and they're not only declining in line with the testing coming down. The positivity rates are dropping.

And so whether it's going higher, as we saw earlier in the summer, or lower, the positivity rate has to be the primary consideration because it sort of nets out the effect of gross or absolute testing levels. And so mathematically, the most honest way to adjudicate is around the percentage, the positivity rate, both of which has been coming down. But I think that if one really wants an even more objective and just sort of noise-free data point, it's hospitalizations. Now, hospitalizations are not even necessarily noise-free. They don't have the same lag problem in reporting that cases do and that certainly mortalities do because by definition, your report on what hospital beds you have that day is a real-time type figure. But even then, there's been noise because the standards have changed and you have this whole issue of hospitalized with

COVID versus because of COVID. But hospitalizations are the closest of the various data points that I'm following each and every day to being pure, to being dependable, and to being relevant to policy formulation. And nothing is driving policy decisions more than hospitalizations. Simply put, the worse the depletion of medical resources is, the more stringent policy response becomes. And on the other side of that, the better things are the less draconian the policy response is around the hospitalizations. People getting a positive result but not getting real sick does not need to change public policy. That should go without saying. That is something the market has understood, by the way, for a couple months. It's something that I think more honest brokers understand when

you talk with people about a sensible public policy formulation. So the economic and medical aspects, this is very key. It may or may not impact media coverage, but it certainly impacts grown-up understanding of this. And that's why the hospitalization data, when it gets worse, has to be taken seriously. And when it gets better, it has to be understood for what it is too. A couple other anecdotal things. The International Journal of Infectious Diseases, major study done out of Japan at Kobe Medical Center, published a study evaluating their data to evaluate the effectiveness of school closures and limiting transmission of coronavirus. And their report was, which I've made available at covidamarkets.com, was a tough read, but it was brilliant. Really, really compelling for those that like this sort

of mathematical methodology that they used. It did ultimately conclude that school closures were not an effective policy in constraining the transmission of the virus. Another interesting tidbit, I want to get a little more information on it, but it is promising, has to report about Eli Lilly potentially having a study being done on experimental COVID-19 drug in nursing homes. Right now, most of our treatments are really, obviously, there's all the vaccine pursuits. And then, of course, there are the therapeutics being used for more traditional, but yet still severe cases of hospitalization. When you get to that level with the very high mortality and the comorbidities that exist in the nursing homes to be able to

do a study with, I think it's 2,400 subjects, to potentially see if there's something that can be done at the nursing home level that could reach elderly in care homes where obviously a very high concentration of coronavirus mortality is taking place would be really, really breakthrough. And so I'm going to follow that story more and keep you posted. Okay. In terms of the various data points, Arizona's, I feel like I'm getting boring because the data just day by day gets a little bit better and better. COVID inpatients are down 43% in just three weeks. ICU down over 35%. Their capacity stayed right in between that 80 to 90% the whole time, a high level, but never to a point where there was this sort of code red

of resource depletion. Their serology is getting close to 20%, which means that Arizona is very likely in a much more immune environment than a lot of the other states. I wish, to be honest with you, that there was a lot more reporting going on right now on Arizona's recovery. It's very disappointing because I think it's relevant to the rest of the country that's trying to understand everything. I think that Arizona's story gives us a bit of a blueprint on what to expect in some of the other states that had some degree of breakout. I'm recording early enough here from New York that I don't have a lot of the daily updates yet, but Orange County, where a lot of you are, did report daily and their positivity rate is now down to 8.9%.

It had been at 9.1. They need to get to 8% or lower, and then they'll be running the table and all the criteria of what they wanted for California Department of Public Health. So we've got to watch that closely. But, again, that positivity rate has come way, way down in Orange County. And then, finally, in Texas, their positivity rate went a way, way down in Orange County. And then finally, in Texas, their positivity rate went a little higher today. So we want to watch that. It's one of the few

negative points on my screen. In terms of public policy side of things, really nothing new to report other than just meetings that both sides are calling positive, but still no deal and no real signs of where the touch points and where the friction points are between the White House and the House Democrats. The Senate Republicans seem to be totally out of the process at this point. Speaker Pelosi is claiming that the $600 a week mark on unemployment is non-negotiable, so we're going to keep following that. A mark on unemployment is non-negotiable, so we're going to keep following that. I will let you go at this point.

There is a couple of things that may be worth your while at COVIDMarkets.com about the Fed, about housing. But unfortunately, I have to run. And so we'll have a much more robust report tomorrow. The general summary is that things are headed in the right direction. There's still plenty of work to do. And we move closer day by day to a better understanding of what it will take to bring normalcy back to our economy and our society. Thank you for listening to COVID and markets and reach out anytime with additional questions. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, with Hightower Advisors LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors LLC.

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